Finra Exam Series-6 Topic 5 Question 94 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 94
Topic #: 5

Clem Shyster is a registered representative with a family of mutual funds. A married couple in their 50s sought his advice about how they should best invest an $80,000 profit that they had received when they sold a rental property they owned for a number of years. Their investment profile indicated to Clem that their main investment objective was capital appreciation and that they were willing to accept moderate levels of risk. Clem advised them to invest $10,000 in eight different growth funds, each of which had a 7% front-end load.

Has Clem violated any securities laws with his recommendation?

ANo. Growth funds invest in stocks that are selected to provide the capital appreciation that Clem's clients need, and an investment in eight such funds will provide them with maximum risk diversification.

BYes. Although growth funds provide some amount of capital appreciation, Clem should have recommended that they spread their money among eight different aggressive growth funds instead, to achieve even greater capital appreciation.

CYes. Clem should have advised them to invest in funds that had a deferred sales charge instead of a front-end load.

DYes. There is a lot of overlap of the individual stocks in which growth funds invest, so recommending that they spread their funds among eight different growth funds has not provided them with significantly more diversification, and it has cost them more to do so, which will benefit Clem.

Show Suggested Answer

Suggested Answer: D

Upon receiving a complaint about one of its member firms, FINRA may require any person associated with the member firm to provide information and to testify under oath; it may inspect and copy the books, records, and accounts of the member firm; and it may share information obtained from its investigation of a member firm with a foreign regulatory agency. The foreign regulator must agree to treat the information confidentiality, and the agreement with the foreign regulator is predicated on two requirements: ''(A) the other regulator party to the agreement must have jurisdiction over common regulatory matters; and (B) the agreement must require the other regulator to reciprocate and share with FINRA information of regulatory interest or concern to FINRA.''

by Leota at Dec 04, 2024, 04:30 PM

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24 days ago

I think Clem did not violate any securities laws with his recommendation.

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